Lasik Price and Quality Concerns Raised To Congress

House Ways and Means Health Subcommittee hears expert testimony.

WASHINGTON, July 18, 2006 -- The following is a transcript of
the testimony of Ms. Ha T. Tu, senior health researcher at the Center
for Studying Health System Change to the Subcommittee on Health
of the US House Ways and Means.

My name the Ha Tu. I am a senior health researcher at the Center
for Studying Health System Change, HSC. The HSC is an independent,
nonpartisan health policy research organization funded principally
by the Robert Wood Johnson Foundation and affiliated with Mathematical
Policy Research.

With funding from the California HealthCare Foundation, HSC has
conducted research on consumer shopping for health services, focusing
on self‑pay services such as LASIK. These self‑pay markets are often
held up as models for all health care markets. However, our research
findings suggest that even for the simplest self‑pay services there
are important barriers to price and quality transparency and the
extent of consumer shopping is quite limited.

That is a point I would like to briefly summarize, our findings
related to LASIK. These findings are laid out in greater detail
in my written testimony.

LASIK is a procedure that offers ideal conditions for price shopping
for several reasons.

First, LASIK is an elective and non-urgent procedure so that
consumers have the time and the ability to comparison shop. Second,
consumers can gather initial price quotes for LASIK by phone at
no cost and little inconvenience. In this respect, LASIK is unlike
many other services that require in‑person exams before any price
quotes can be given. Finally, easy entry into this market by ophthalmologists
has helped to encourage price competition.

Our research found that competition has helped to keep prices
down in the LASIK market. The average price for the conventional
LASIK procedure has declined by nearly 30 percent in the past decade
after adjustment for inflation. However, this price decline has
been much less steep than a casual observer would expect, given
the pervasive ads that most of us have seen for LASIK for $299.
In fact, the average price of LASIK in the past year was about $2,000
per eye; and only about 3 percent of LASIK procedures actually cost
less than a thousand dollars an eye.

We find that most consumers, in choosing a LASIK provider, rely
heavily on word‑of‑mouth recommendation from previous patients.
This is true of consumers in all price segments of the market. While
consumers of premium-priced practices tend to focus on quality and
consumers of discount-priced practices tend to focus on price, word
of mouth is the primary way consumers choose the LASIK surgeon whatever
the price segment of the market.

We identify three major challenges facing LASIK consumers.

First, LASIK providers don't package their services in any consistent
way when they quote their fees to consumers; and, as a result of
this, it is extremely difficult for consumers to make accurate apples‑to‑apples
price comparisons across providers.

Second, some LASIK providers have engaged in misleading advertising
by making price and quality claims that regulators have found to
be unfounded. Both Federal and State regulators have taken action
against misleading advertisers, but violations have persisted in
this industry, and regulators acknowledge that they don't have the
resources to monitor all of the violations.

The final challenge for LASIK shoppers is that substantial quality
differences do exist across providers. There are large variations
in how thoroughly providers screen patients, what kind of technology
they use, and what their outcomes are, including success rates and
complication rates. These variations are all evidence that LASIK
is not a commodity, although it is often talked about as a commodity.

To summarize, we find there are barriers to price and quality
transparency in the LASIK market, and these help to limit shopping.

When we turn to other self‑pay services such as in‑vitro fertilization,
cosmetic rhinoplasty and dental crowns, we find even less shopping
taking place in those markets because of additional barriers such
as the cost and effort involved in getting price quotes, and in
some IVF and dental crown cases, there is urgency involved which
precludes comparison shopping.